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Gas hikes pushing up other prices

WASHINGTON—Skyrocketing crude-oil prices are hitting Americans in the wallet in ways they might not imagine, increasing the price of everything from pizza delivery to patching a leaky roof.

This week gasoline costs about $2.37 a gallon on average, reflecting global crude-oil prices that soared past $64 a barrel. A year ago, oil cost $44 a barrel and gasoline $1.89 per gallon.

Many U.S. companies are passing on their rising fuel costs to their customers. Most large airlines charge per-ticket fuel surcharges of $20 to $87 for international travel, and many domestic fares have jumped more than $100.

Oddly enough, pizza makers are doing it too. Major chains such as Domino's and Papa John's have added a $1 fuel surcharge in most major markets.

"The delivery charge helps offset costs associated with increasing drivers' per-run payment, labor costs and insurance," said Dana Harville, a Domino's spokeswoman in Ann Arbor, Mich.

Papa John's surcharge covers more than its drivers' rising fuel costs.

"Our restaurants have felt the pressures on the food-cost side due to the higher ingredient costs related to fuel," said Chris Sternberg, a spokesman for Papa John's International Inc. in Louisville, Ky.

Few businesses depend more on surcharges than package-delivery companies such as Federal Express, which has seen higher costs for jet fuel for its planes and diesel fuel for its trucks. FedEx revises its surcharge monthly; for August it stands at 12.5 percent for express shipments and 2.75 percent for its slower ground service.

Fuel surcharges were first imposed in 2001. While unpopular, they allow those who ship via FedEx to factor for fuel-price volatility.

"We are part of the supply chain. The surcharge allows them to plan ahead accordingly," said Lourdes Pena, a FedEx spokeswoman in Memphis, Tenn.

FedEx and its rival United Parcel Service are racing to add delivery vans that run partly on electric power in a bid to cut fuel costs.

Online retailers may be the exception to the pass-the-buck rule. Some depend on FedEx or UPS, but many Amazon.com partners ship via the U.S. Postal Service.

"We use the USPS. Postage rates have not changed as a result of gas prices as of yet," said a representative of Book Bizarre, an Amazon partner that sells used books.

Higher fuel prices eat away at American incomes in less obvious ways, too.

Take roofer Larry Michaels in Kansas City, Mo. The asphalt he uses to patch leaking roofs and as a sealant under tiles and shingles is a byproduct of refining oil into gasoline.

"Almost all of our roofing materials, more than 90 percent of it, is made from byproducts of oil," Michaels said, explaining why he must pass on rising costs to customers. "We've been averaging one or two price hikes a month just on materials costs."

Soaring gas prices also forced Michaels to restructure how he gets work.

"I never paid attention to the price of a gallon in my whole life," Michaels confessed.

He does now. To save on fuel, he lets bid requests build up for two days or more before driving to visit several potential clients at once.

Contractors who pave driveways, parking lots and roads also are raising rates to pass along rising prices for asphalt and other materials.

"The price is going up due not only to the price of asphalt; even the costs of aggregates (such as crushed stone and gravel) are going up," said Kent Hansen, the director of engineering for the National Asphalt Pavement Association in Lanham, Md. "The price of everything is going up: the cost to transport it and the cost to make it."

For state and local governments, pricier asphalt forces an unpleasant choice: Scale back road building and repairs, or raise taxes.

"It's sort of a Catch-22 ... the more we put off doing overlays and repairs, the worse the pavement gets and it costs more later to repair it," Hansen said.

When oil prices rose sharply in the past, prices of related products followed, driving up inflation, the measure of rising prices across the entire economy. Inflation erodes consumers' buying power.

Inflation fears spiked early this year as crude oil surged above $50 a barrel, but the U.S. economy has proved flexible; consumer-price inflation was a manageable 2.5 percent from June 2004 to June 2005, according to the latest available data.

"Everybody is surprised how well the economy is holding up. Nobody would have expected this to be the case," said Thorsten Fischer, an energy economist with Economy.com, a consultancy in West Chester, Pa.

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(c) 2005, Knight Ridder/Tribune Information Services.

GRAPHIC (from KRT Graphics, 202-383-6064): oil prices

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